Sandalwood Oil Producer TFS Acquires ViroXis and Santalis in Deal Worth Up to $270 Million
June 18, 2015
By Alex Keown, BioSpace.com Breaking News Staff
PERTH, Australia – Australia-based TFS Corporation, a Sandalwood producer, acquired two U.S.-based pharmaceutical companies ViroXis Corporation and Santalis Pharmaceuticals for a combined minimum price of $23.4 million, the company announced this morning.
TFS said the acquisition of the two dermatological companies will extend TFS’s vertically integrated strategy from “soil to oil” to “soil to oil to shelf.” Both ViroXis and Santalis manufacture and market dermatological products containing TFS pharmaceutical grade Indian sandalwood oil, including Benzac, which was developed by Santalis and is used to treat acne, the company said.
“While TFS previously benefited from pharmaceutical product development through oil sales, with these acquisitions we will also capture all of the future product earnings, including product royalties and licence (sic) fees, generated by ViroXis and Santalis, thereby significantly enhancing our own earnings,” Frank Wilson, chief executive officer of TFS said in a statement.
Over time the total acquisition could be worth about $270 million if all milestones are reached by mid 2023, TFS said. The acquisition of the two companies is not expected to impact TFS’ projected revenues of about $90 million for 2015.
TFS said controlling the two Texas-based pharmaceutical companies will allow the company to secure 100 percent of royalty and license fees generated from the development and sale of existing and new pharmaceutical products containing Indian sandalwood oil, as well as expand end markets for the company’s sandalwood oil. Since 2010 both pharmaceutical companies have invested more than $17 million in the development and commercialization of sandalwood products.
Santalis, founded in 2010, was a 50 - 50 joint venture with TFS, before the latest deal went through.
In addition to sandalwood products developed by ViroXis Corporation and Santalis Pharmaceuticals, TFS licensed its sandalwood oil to Nestle-owned Galderma, a dermatological company. Benzac Complete Acne Solution Regimen, Galderma U.S.’s first-ever, over-the-counter (OTC) acne regimen, includes Benzac Skin Balancing Foaming Cleanser, Benzac Intensive Spot Treatment and Benzac Blemish Clearing Hydrator. The Benzac regimen treats stubborn acne and prevents new breakouts from forming with salicylic acid, while pharmaceutical-grade East Indian Sandalwood Oil calms and soothes the skin. In a study, 91 percent of people saw an improvement in their acne after using the regimen for two weeks.
Following the acquisition, TFS said key staff at both U.S. companies is expected to remain in place.
According to TFS, the market share for sandalwood oil infused products for dermatological use is approximately $12 billion, which includes medications for acne, psoriasis and eczema.
The acquisitions of ViroXis Corporation and Santalis Pharmaceuticals is the latest in a round of mergers and acquisitions in the pharmaceutical sector that has seen more than $100 billion worth of deals over the past year. There has been a spate of large pharmaceutical companies snapping up smaller startups and entities, including Pfizer Inc. ’s $17 billion merger agreements with Illinois-based Hospira, Inc., or Amgen ’s acquisition of Onyx Pharmaceuticals, Inc. for $10 billion in 2013. In April Valeant Pharmaceuticals International, Inc. , won a bidding war against Endo Pharmaceuticals to acquire Salix Pharmaceuticals, Ltd. , the maker of Xifaxan, a drug used to treat traveler’s diarrhea and liver disease, for approximately $11 billion in cash. There has been an estimated $100 billion spent on pharmaceutical mergers and acquisitions since 2014, and more than 245 deals this year alone.
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